44. A newly issued bond pays its coupons once a year. Its coupon rate is 5%, its maturity is 20 years, and its yield to maturity is 8%. (LO 10-6) a. Find the holding-period return for a one-year investment period if the bond is selling at a yield to maturity of 7% by the end of the year.

44. A newly issued bond pays its coupons once a year. Its coupon rate is 5%, its maturity is 20 years, and its yield to maturity is 8%. (LO 10-6) a. Find the holding-period return for a one-year investment period if the bond is selling at a yield to maturity of 7% by the end of the year.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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For the following questions, assume the normal case that coupon payments are semi-annual. a. What is the yield to maturity on a 12-year, 6.2% coupon bond if the bond is currently selling for $1,000? b. For the bond above, suppose that immediately after purchase market rates change to 3.60%. If you hold the bond for 4 years and then sell it, what is your effective annual return on this investment? % (enter response rounded to decimal places; i.e., x.xx%) b. Your effective annual return is % (enter response rounded to decimal places; i.e., x.xx%) a. The YTM is
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